unit3-2 Flashcards
parts of a policy
DICEE Declarations Insuring agreements Conditions Endorsements and additional supplementary coverages Exclusions
what is found in the declarations section
information relative to who, what, when, and where
what is found in the insuring agreement
promises made by insurance company and states what is covered
what is the conditions section
states policy 1. provisions, 2. rules of conduct, 3. duties, and 4. obligations required for coverage
what is the Endorsements section
add, modify or take away coverage
Excusions section
take coverage away from the insuring agreement. ex: flood damage may be an exclusion in a policy
additional/ supplementary coverage
payment for additional expenses not normally covered. may have separate limit of insurance
unearned premiumn
unused premium paid in advanced will be returned to insured upon cancellation of policy
money returned on a prorated basis if?
if the insurer cancels the insured’s policy
short-rated basis
unearned premium returned on a short rate basis
surcharge or penalty for early cancellation. no advanced notice given by insured. partial refund of unearned premium
flat cancellation
when a policy is canceled on the effective date by the insurer or insured
what is cancellation
stop policy before expiration date. full refund given if give advanced notice (pro-rata)
purpose of deductible
prevent small insurance claims and overuse of insurance claims
what is nonconcurrence and where is it commonly seen?
two or more policies covering the same property but providing different or non-identical coverage. seen in commercial insurance policies
Pro rata
each insurer’s liable for a portion of the loss
formula for calculation pro rata
pro rata (determine % each policy contributes to the total amount or insurance)
policy limit of one company/ policy limit of all companies * loss
contributions of equal shares
each policy pays the same up to the smallest policy limit to prevent gain (indemnity)
provisions
conditions. list of duties and rights of both the named insured and the insurer
Named Insured’s Duties After Loss
PPC MSC
- Prompt notice to insurer
- Protect property from further damage
- Complete proof of loss (if asked)
- Make property available for inspection
- Submit to examination under oath if required
- Cooperate with insurer
policy can’t be transferred without what?
consent
salvage
when insurance company takes possession of damaged property after payment of loss to sell for parts- can lower claim lost for insurance company
liberalization
- extended coverage to insured
- no additional premium charged
- not action required by insured
subrogation
transfer of right of recovery against others to us. insurer has the right to sue an at fault party for damages the insurer had to pay to the insured. common when at fault party does not have insurance.
insurable interest
risk of financial loss
may be present at the time of application
must be present at time of loss
underwriting
process of evaluating risk and exposures of potential clients
who is responsible for field underwriting
the agent or producer. using pre-established criteria. seek out risk acceptable to companies
what do underwriters do
decide whether to accept or reject applications sent in by producers or agents on the basis of company underwriting standards
application
primary source of underwriting info
binder
a.k.a temporary. oral or written statement made by the agent that gives the insured immediate coverage for a specified time
3 ratios used to evaluate financial performance of an insurance company.
loss, expense, combined
loss = amount of incurred losses/amount of earned premium.
used to compare company’s operations from year to year.
shows the percentage of losses the company incurred for every dollar of earned premium
indicator of the cost of doing business
expense ratio = underwriting expenses/ amount of written premium
underwriting expenses
cost to acquire to keep policies. expenses include: advertising, commissions, salaries, administrative cost, regulatory cost such as taxes and licensing fees
written premium
gross amount of premium income received from insureds
combined ratio
sum of the loss ratio and the expense ration. 100%= breakeven point. greater than 100% is an underwriting profit.
the amounts of coverage and limits of liability are found in what section of the policy
declarations
the federal gov. is not obligated under the TIRA to make payments if losses exceed how much annually
100 billion
when an insurance company cancels a policy, what is the method used to determine the premium due
pro rata
a short rate basis is used when the insured cancel the policy
pro rate equation
policy limit A/(policy limit A+B)*loss= payment for policy A
loss ratio
measure underwriting profitability
claim paid/ premiums received
lower ratio is better
what does the insurer keep in a short-rate cancellation
all earned premium plus overhead expenses
named insured vs first-named insured
named- who the policy is issued to
first-named- may assign a higher level or duties or rights to
earned premium
amount of money that the insurance company makes by providing insurance for a designated period
